The owner of the world’s deepest platinum mine, Northam Platinum Ltd, announced its plans to build a new platinum mine in South Africa in an effort to boost production by approximately 50%. The company plans to fund the 3.6 billion rand ($493.4 million) Booysendal mine project with through a combination of a convertible bond, short-term debt and its own cash.
Northam Platinum, which produces about 300,000 ounces of platinum group metals (PGM) each year, reported a year of “mixed forturnes.” Despite a 23.8% increase in sales revenues, they stated that production at their Zondereinde platinum mine, the company’s only operating mine, has encountered difficulties as the mine has grown deeper and the mining teams have encountered difficult rock formations.
According to the platinum mining company’s fiscal statement released on Friday, August 20, Northam’s output will probably fall in the coming 2011 year due to geological “challenges”. Costs seem likely to rise with higher wage demands and expenses such as power, chemicals and explosives.
It is expected that the government will approve an environmental management plan for Booysendal within the next month which would allow for construction to begin on the primary plant. According to CEO Glynn Lewis, building work must begin by the end of October in order for output to begin by January 2013, as planned.
While Mr. Lewis remains optimistic about the project and has high hopes that the new platinum mine and smelting facility will boost sales, Sasha Naryshkine, a Vestact analyst, sees the many risks for Northam Platinum.
“The future of PGMs [platinum group metals] mining is great although there are some environmental concerns and funding will not be easy to obtain,” Mr. Naryshkine said.
Shares of Northam Platinum have fallen 12.8 % this year, while shares of Anglo Platinum Ltd., the largest and most successful producer of platinum, fell 16%.
